How to Set Sales Quotas: A Bottom-Up Method With a Worked Example

A sales quota is a revenue or activity target assigned to one rep for one period. Set one bottom-up: count the rep’s selling days, apply their own activity-to-deal conversion rates and average deal size to get a capacity number, then check that number against the top-down revenue plan before you assign it.

This method is for sales managers and revenue operations setting individual quotas for account executives and sales reps. It does not build the company’s overall revenue plan (that number comes first, and this guide shows how to turn it into a number one rep can actually own), and it does not set commission rates or accelerators, which are a compensation-plan decision layered on top of the quota.

What is a sales quota, and how is it different from a sales forecast?

A quota is a target set once per period and tied to compensation: hit it, and the comp plan pays out as designed. A forecast is a live prediction of what will actually close this period, built from the deals actually in the pipeline right now; see how to build a sales forecast for the methods. A goal, or stretch goal, sits above quota and isn’t tied to pay.

Confusing quota with forecast causes two different problems at once. A quota that moves every time the forecast moves stops being something a rep can plan against. A forecast that gets rounded up to match quota stops telling leadership the truth about what will close. Keep the two numbers, and the two conversations, separate.

How do you calculate a bottom-up sales quota?

Build the number from four inputs a rep and their manager can both see on the record, not from a company-wide guess.

1. Selling days. Days available to sell this period, after subtracting company holidays, the rep’s planned time off, and training, kickoff or admin weeks that show up on your calendar every year.
2. Activity capacity. The number of qualified activities (discovery calls, demos, whatever sits at the top of your funnel) a rep at full capacity completes per selling day, pulled from your own activity log rather than assumed.
3. Conversion rates. The rate at which that activity becomes a qualified deal, and the rate at which a deal closes won, the win rate. Both come from your own pipeline history; see how to calculate win rate for the formula and which deals belong in the denominator.
4. Average deal size. The average value of a closed-won deal in the segment this rep sells into, not a blended company-wide average that mixes enterprise and small-business deals.

Multiply them through: selling days × activities per selling day gives total activities for the period. Total activities × the activity-to-deal rate gives qualified deals. Qualified deals × win rate gives won deals. Won deals × average deal size gives the rep’s bottom-up quota.

Worked example: one rep’s quota from capacity

Example: an account executive on a 12-rep B2B SaaS sales team in Austin sells scheduling software to mid-market field-service companies. Her manager builds next year’s quota bottom-up before assigning it. Every number below is illustrative.

• Selling days. Her calendar shows about 46 selling weeks after two weeks of company holidays, three weeks of planned time off and one week of kickoff and training.
• Activity capacity. Her own activity log shows she comfortably runs five qualified discovery calls a week without shortchanging later-stage work: 230 discovery calls for the year.
• Conversion rates. Last year’s pipeline report shows 40% of her discovery calls become a qualified deal, and, using the win-rate formula, 25% of her deals close won.
• Average deal size. Her segment’s average closed-won deal, from the same report, is $18,000.

Run the math: 230 discovery calls × 40% = 92 qualified deals. 92 qualified deals × 25% win rate = 23 won deals. 23 won deals × $18,000 average deal size = a $414,000 bottom-up quota.

How do you check a bottom-up quota against the top-down plan?

A bottom-up number tells you what one rep’s capacity supports. It still has to answer to the company’s plan. Run the check as a short process with a named owner at each step.

1. Set the plan. Leadership and finance set the company or segment revenue target for the period. Owner: VP of Sales and finance.
2. Allocate it top-down. Revenue operations divides the segment target across quota-carrying reps by capacity or territory weight, producing a top-down number per rep. Owner: RevOps.
3. Compare the two numbers, rep by rep. A small gap is close enough to round to the top-down figure. A large gap means an input in the bottom-up formula, or the top-down allocation, is wrong: that’s a diagnostic, not a reason to force the number. Owner: sales manager and rep.
4. Write down what changed. If you raise a bottom-up number to meet a top-down target, note which assumption has to hold (more activity capacity, a better win rate, a bigger average deal) so the rep knows what “on pace” should look like at the midyear review. Owner: sales manager.

Back to the worked example: the company’s plan for this segment is $4.2M for the year, split evenly by tenure and territory across 10 quota-carrying reps: $420,000 top-down per rep. Her bottom-up number, $414,000, is about 1.4% under that. Her manager sets her quota at the top-down figure and notes that it assumes one more won deal than her own history predicts, so that’s the number to watch first at the midyear review.

How should you ramp a new rep’s quota?

A rep hired mid-cycle shouldn’t carry a full quota from day one: nobody closes deals during onboarding, and a fixed quota that ignores that punishes a normal ramp period as underperformance. Use a ramp schedule instead, expressed as a percentage of the full quota built the same way as above.

The shape above is a common starting point, not a fixed rule. The right length depends on your own sales cycle: a rep selling on a 90-day cycle needs longer to ramp than one on a two-week cycle, because the ramp has to cover at least one full cycle before the first deal can close.

What mistakes make a sales quota fail?

• Starting from last year’s number plus an arbitrary increase, with no capacity check behind it.
• Using one company-wide average deal size for every rep, when segments and territories don’t sell the same deal.
• Skipping the ramp schedule and holding a new hire to a full quota in month one.
• Never revisiting quota mid-year when a territory, product line or price list changes enough to move the underlying inputs.
• Blending renewals and new business into one number, when they call for different skills and different math.

How do you know if quotas are set right?

There’s no single target attainment rate that proves a quota is correct: judge it from the shape of the results across the team instead. If nearly every rep clears quota by a wide margin, the inputs, or the top-down allocation, were probably set low. If most reps fall well short, check first whether the ramp schedule was actually applied and whether the conversion rates you used held for a full year rather than one strong quarter.

The rep-by-rep gap you calculated between bottom-up and top-down is worth rechecking against the actual result at year-end, too: it tells you which specific input was wrong, not just that the total number was.

Where does a CRM help with sales quotas?

The bottom-up formula above only works if the inputs come from real records instead of a guess, and keeping those records is what a CRM is for. In Senitix CRM, activity, win rate and average deal size reports are available on every plan, including Free, so a manager can pull the actual numbers behind each input rather than assume them; see reporting and dashboards.

The forecast grid holds each rep’s quota next to their open pipeline by forecast category, keeps a manager’s adjustment as its own line, and tracks forecast accuracy over time, so once quotas are set the way this guide describes, the same screen shows whether the team is on pace to hit them. Compare plans and see what’s included at each tier on the pricing page.

Frequently asked questions

What is the difference between a sales quota and a sales target?

Most sales organizations use the two words for the same thing: a number one rep is expected to close in a period. “Goal” or “stretch goal” is the separate term for an aspirational number above quota that isn’t tied to compensation. Keep quota tied to what capacity actually supports, and put anything above it in a stretch goal instead, so the comp plan stays honest.

Should quota include renewals or only new business?

Most B2B teams separate them, because they need different skills and different math. New-business quota comes from the bottom-up formula in this guide; renewal quota starts from the existing book of business and an expected retention rate instead of activity capacity. If one rep carries both, quota them as two numbers that add up to one target rather than one blended figure.

How long should a new rep’s ramp period be?

Long enough to cover at least one full sales cycle, since a rep can’t close a deal faster than your buyers decide to buy. A team with a 60-day sales cycle needs a longer ramp than one with a two-week cycle. A common shape is 0/25/50/75/100% of full quota over three to four months, adjusted to your own cycle length.

How often should you revisit sales quotas?

Set them at least once a year, and sooner if a territory, price list or product line changes enough to move the inputs (a bigger average deal size, a competitor cutting into win rate, or a shrinking territory). A quota built from a formula is easy to rebuild when one input changes; a quota that was a guess to begin with has nothing to adjust.

Does hitting quota mean the quota was set correctly?

Not on its own. Check the distribution across the team: quota was likely set too low if nearly everyone clears it by a wide margin, and likely too high, or the ramp wasn’t applied, if most reps fall well short. The goal is a number a rep working at a sustainable pace can reach, not one only the strongest performer hits.